Ericsson ERIC is set to report first-quarter 2015 results on Apr 23. Last quarter, company’s adjusted earnings came in line with the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Over the past few months, Ericsson has been making concerted efforts to strengthen its position in the in the broadcasting and media industry by offering state-of-the-art technology for merging video and mobility.
Moreover, Ericsson’s acquisition of Canadian-based TimelessMIND will not only improve its foothold in the North American markets but also provide a significant boost to the its portfolio of operations and business support systems (OSS/BSS). Ericsson has also taken certain steps to improve its position in the telecommunication industry. Recent acquisition of the Chinese IT services provider Sunrise Technology holds tremendous potential for the company, as China is one of the most lucrative markets in the world with around 1.285 billion mobile subscribers.
Apart from these initiatives, Ericsson is striving hard to strengthen its Internet of Things (‘IoT’) portfolio. Bridge Alliance’s (business collaboration of 36 major mobile telecommunication companies) decision to choose Ericsson’s Device Connection Platform (“DCP”) for IoT management will allow the latter to cater to a vast scale of customers around the world, thereby driving top-line growth, going forward.
Finally, Ericsson’s attempt to fuel 5G enabled solutions for Swedish companies also promises bright prospects for the near term. All these steps indicate that Ericsson is not only diversifying its product portfolio but also expanding its global presence to maintain a competitive edge over its peers that will likely supplement its revenue growth.
Earnings Whispers
However, our proven model does not conclusively show that Ericsson is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earning ESP and a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Expected Surprise Prediction or Earning ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This indicates in-line earnings for the shares.
Zacks Rank: Ericsson’s Zacks Rank #4 (Sell), when combined with 0.00% Earnings ESP, makes surprise prediction difficult. Note that stocks with a Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings.
We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies which you may consider instead, as our model shows they have the right combination of elements to post an earnings beat this quarter:
Apple Inc. AAPL, Earnings ESP of +1.38% and a Zacks Rank #2.
AXIS Capital Holdings Limited AXS, Earnings ESP of +13.56% and a Zacks Rank #1.
Amazon.com Inc AMZN, Earnings ESP of +175.00% and a Zacks Rank #3.
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